The ratings agency’s comments come as negotiations for the 2017 reinsurance contracts begin in Monte Carlo in September.

Premiums will continue to decline in the absence of very large losses, said S&P in the report. “Competition has increased, putting pressure on reinsurers' top and bottom lines.”

They predict returns will continue to weaken, with a combined ratio of 97%-102% and return on equity of 7%-9% for 2016, a deterioration from previous years.

S&P believes the industry is slow to respond to changes in the market.

“We also see the possibility that the reinsurance industry's relevance to cedants and other buyers could be under threat from alternative capital or technology companies, or that reinsurers' relaxed attitude to product innovation could undermine the value of reinsurance in buyers' minds,” it said in the report.

“We see limited evidence of reinsurers actively looking to address these risks, and if this remains the case, it could lead to negative rating changes over the longer term.”

Smaller firms are expected to be worst-hit, as larger companies have “more tactical tools” to survive the soft cycle and are better positioned to help ensure their relevance to clients in the long term.

“Larger, more diversified reinsurers, with lower costs of capital and more comprehensive product offerings, should be able to retain more business that meets their profitability targets than more concentrated, less sophisticated peers.”

The organisation predicts overall firms should have enough capital to absorb continued price declines, a significant catastrophe shock, earnings deterioration, or increased asset risk over the next 12 months. Therefore it does not anticipate many rating changes despite the weak business conditions.

“Our ratings on global reinsurers reflect these firms' extremely strong capital adequacy, enterprise risk management, and competitive positions, which should allow them to withstand the unfavourable conditions for the next year.”

S&P’s report was published to coincide with the 2016 Reinsurance Rendez-Vous, an industry event taking place this week in Monte-Carlo.